Lower oil prices predicted for next year

Opec, the oil producers' cartel, is poised to cut its production this weekend, as the world's leading energy think-tank said prices were set to fall back to US$50 a barrel.

A drop in oil prices would probably filter through to lower prices at the fuel pump.

Iran said the 11-nation group should cut its output quotas by a million barrels a day to prevent a slump in prices.

Kazem Vaziri-Hamaneh, its oil minister, told an Iranian newspaper that a reduction to 29 million barrels a day would be a "good figure with respect to market fundamentals".

"Currently crude supply exceeds demand. If the current situation persists, it is likely to cause a price slump," he told Sharq newspaper.

"Usually after winter, oil demand goes down and [Opec] should cut output to ensure that the prices remain stable," he said, adding that he expected prices to remain between US$50 and US$60 a barrel in 2006.

The current price of oil is around US$59 a barrel and 91 octane petrol is about $1.36 in main centres in New Zealand, after peaking above $1.55 earlier in the year.

Opec meets on Saturday to decide on quotas and Sheikh Ahmad al-Fahd al-Sabah, its president, said on Monday that it was likely to decide to cut production from the second quarter of 2006.

Meanwhile Fatih Birol, the chief economist of the International Energy Agency, said prices should fall next year as long as there was no cold snap or fresh crisis in the Middle East.

"Energy prices could decrease somewhat, but in principle they will remain on a high level," he told the Berliner Zeitung newspaper.

"If things run well, but only then, the average price could sink to US$55.

That is still a lot of money, so for consumers we cannot give the 'all-clear' signal."

Crude oil prices rose yesterday on the back of the Iranian's comments.

Oil for February delivery rose 22 cents, or 0.4per cent, to US$58.38 a barrel on the New York Mercantile Exchange.

- INDEPENDENT